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Life Settlements - The Devil is in the Details - Aaron Skloff, AIF, CFA, MBA - CEO Skloff Financial Group

1.
Life Settlements
The Devil is in the Details
www.skloff.com

2.
Wall Street Journal – Grim Risks of Reaping Death’s Rewards - 02/06/10
“Death is inevitable, but good investment returns aren’t – especially those
that rest on how long people live.”
“Called life settlements, these arrangements allow senior citizens to sell
their policies at a discount to face value.”
“As a buyer, you claim the benefits when the seller dies. Investment
earnings hinge on how long the insured person lives.”
“The ghoulish facts of such investing: The sooner the original
policyholder dies, the better for the investor.”
www.skloff.com

3.
Wall Street Journal – Grim Risks of Reaping Death’s Rewards - 02/06/10
Let’s Review the Economics for the Investor
“Say you purchase a $1 million policy held by an 82-year-old woman.
Actuarial tables say she has five years to live.”
“If you deal via Life Partners Holdings Inc., a major life settlements firm,
you must pony up $540,000. The woman gets $200,000 of that; the
remainder goes toward future premiums and transaction fees.”
www.skloff.com

4.
Wall Street Journal – Grim Risks of Reaping Death’s Rewards - 02/06/10
Let’s Review the Economics for the Investor
“Should she obligingly die on time, you net a 13% annual return.”
“Yet if she doesn’t shuffle off this mortal coil for 10 years and you end up
forking over much more in premiums, the return sinks to 3%.”
“Every extra year she soldiers on, your take shrinks.”
www.skloff.com

5.
Wall Street Journal – Grim Risks of Reaping Death’s Rewards - 02/06/10
Let’s Review the Economics for the 82-Year-Old
Instead of the 82-year-old woman’s beneficiaries receiving $1 million
when she passes away (in an estimated five years), she receives $200,000
today.
Let’s look at her cost if she chose to maintain her life insurance that costs
$10,000 per year (because she delayed purchasing it until she was 55-
years old) versus taking $200,000 today.
www.skloff.com

7.
Wall Street Journal – Grim Risks of Reaping Death’s Rewards - 02/06/10
Warning
Between January 2004 and July 2009 the Securities Exchange
Commission took legal action against 27 U.S. Life Settlement Funds and
Advisers, according to Conning Research & Consulting.
Life Settlements make the Top-10 list of “Investor Traps”, says the North
American Securities Administrators Association.
In May 2009, the IRS ruled that death benefits received by investors
should be treated as ordinary income, not as a lower-cost capital gain.
www.skloff.com